Afternoon summary
Time for a recap:
London’s stock market has posted its biggest one-day loss since March, dragging the FTSE 100 down to its lowest closing level of this year.
World markets are on track for their biggest daily loss of the year, as fears of looming interest rate rises grip investors. There have been heavy losses across Europe, while Wall Street’s S&P 500 has fallen by over 1%.
Danni Hewson, AJ Bell head of financial analysis, says:
“You know things are bad when you can count the stocks ending the day in positive territory on one hand.
London’s FTSE 100 saw just three stocks end the day in positive territory, with United Utilities and Severn Trent making up a touch of the ground lost since fears were raised about the financial health of Thames Water and supermarket giant Tesco proving that every little does indeed help.
It was with a sense of déjà vu investors ruminated over impending recession warning signs and a Fed back in hawkish form.
The selloff has been fuelled by a surprisingly strong US private sector jobs report, which showed that American companies added almost half a million jobs in June, twice as many as expected.
This labor market strength is likely to prompt America’s central bank to raise interest rates again soon, perhaps later this month.
ADP released their employment report for June, showing that there were 497,000 job creations, which was more than double the estimates of 225,000. Last month's figure of 278,000 was revised slightly lower to 267,000. The goods sect…https://t.co/9108CBMaAi https://t.co/XZSUqZ63Sg
— Kevin Kelly (@DCKevinKelly) July 6, 2023
The City are now fully pricing-in that UK interest rates will soar to 6.5% by December, up from 5% at present.
Two-year UK mortgage rates have risen again today, to an average of 6.52%, up from 6.51% yesterday, Moneyfacts reports.
And the interest rates on UK two-year government bonds has hit a 15-year high today, as gilts continued to be sold off by anxious traders.
Checkout the yield curve for the UK gilt market.
— Preston Pysh (@PrestonPysh) July 6, 2023
Already well beyond the aggressive SEP 2022 intervention when they rescued everything.
The selling is relentless.
None of this is under control…. pic.twitter.com/7uT76lXWrC
Bank of England governor Andrew Bailey has said that inflation remains “way too high”. In an interview with BBC’s Newsround, Bailey said he understood that high interest rates were hurting households, saying:
I understand it is difficult. People are having to make very difficult choices about what they buy, what they need for their lives.
Bailey also warned that some retailers, such as petrol sellers, were overcharging customers, adding to inflation.
Here are the rest of today’s main stories so far:
Updated
FCA sets out expectation for "fair and competitive saving rates" after meeting banks
Britain’s financial watchdog has concluded its meeting with the UK’s top banks today, to discuss why savings rates are so low despite the rise in interest rates.
The Financial Conduct Authority has now issued a statement, saying the meeting was “constructive”, and that there are signs of “positive action” by banks and building societies.
The FCA also says that the UK bank chiefs “recognised that they needed to do more” to help savers.
Here’s the statement:
Many people are feeling the squeeze from rising interest rates and prices, so it is more critical than ever that they are offered fair and competitive saving rates. We held a constructive meeting today, which builds on work we have been doing over several months – to monitor the savings markets and the decisions made. We have challenged firms where their decision making has been slow.
Through preparation for our new consumer duty, which requires the firms we regulate to put consumer interests at their heart, we have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products. We now want to see that progress accelerate. We are also increasingly seeing customers switching their savings products to those with higher rates. We continue to urge savers to shop around to make sure they’re getting the best deal.
We want to see a competitive market with fair value retail banking products – and with banks helping consumers to access them. We discussed how our consumer duty will set a new standard for firms from the end of July, including on savings rates. We set out that expectation to bank and building society leaders in today’s meeting.
Those in the room recognised that they needed to do more to help their consumers access the best rates. We too recognise there is a need for further guidance, and will continue our focus on this.
We have previously committed to reporting at the end of the month on how the savings market is supporting savers to benefit from higher interest rates. We will set out then whether further steps are needed.
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